question archive Company A hired Nick as an agent and gave him a letter authorizing him to make purchases on behalf of the company
Company A hired Nick as an agent and gave him a letter authorizing him to make purchases on behalf of the company
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Company A hired Nick as an agent and gave him a letter authorizing him to make purchases on behalf of the company. In a separate email, the company explained to Nick that he could only make purchases for 100,000 or less. In other words, 100,000 was the reservation price for his negotiations. Nick proceeded to negotiate a contract with a new supplier, B, in which he purchased goods for 95,000. Nick showed B the letter of authority from the company but did not mention the 100,000 limitation that the company explained in the email.
a. Company A is bound by the contract because Nick had express authority.
b. Company A is bound by the contract because Nick had apparent authority.
c. Company A is not bound by the contract because of illegality.
d. Company A is not bound by the contract because of unconscionability.
e. Company A is not bound by the contract because of fraud.
f. none of the above.
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The correct option is a. Company A is bound by the contract because Nick had express authority.
Explanation:
Given that, Company A made a contract with Nick under which he gives purchasing authority to Nick on behalf of the Company. He is liable to make a purchase of 100,000 or less. Here, Nick makes a purchase of $95,000 that is acceptable amount according to the contract due to which the contract bounds company A because it gives express authority to Nick.
